What Type of Trader Are You?
What’s New, Lubna? Vol. III: know all the different kinds of Trader and how they optimize their profit!
The financial market is a vast lane of danger and opportunity. Residing in it are various types of people using different techniques to make the best out of their journey. Whatever asset or market you’re playing in, it is important for you to decide how you’re going to play your role in this game. After you know what type of Trader you are, you can utilize the right kind of tools and software to make the best decisions for your trades. The trading technique you will choose should be based on your knowledge of the market you’re playing in that also match with your investment goal. In this chapter of ‘What’s New, Lubna?’, we will elaborate all the different kinds of Traders and whether or not the style fits you. Read on!
Day Traders
Day Trader never loses their beauty sleep — means they always closes their position at the end of each trading day with either a profit or a loss. The key is that they never hold onto their trades overnight. Day Traders usually have outstanding knowledge on the market they’re playing. They will meticulously monitor the technical indicators and analyze which time is the best to open and close their position. This is unique because other type of Traders usually rely on their instincts to optimize their profit.
So, you know that day Traders are specifically meticulous to determine their every trading actions, but what else do you need to do when you decide to become a day Trader? Basically, day Traders decide whether to buy, sell, or hold their position based on price action characteristics rather than fundamental analysis. Day Traders are also very careful with their trades, they will make sure that the current price has a very sufficient movement because day Traders make profit from price movement of securities.
Scalpers
Have a fear of commitment? Then you might be a scalper. Unlike other type of Traders, scalpers hold onto their trades for a very short amount of time to make profit. They will buy and sell multiple trades a day in hope to make small profit consistently. Scalpers can either trade manually or with an automated program to execute their trades. With automated program, scalpers will teach the system how to read and use trade signals to make better outcome to their trades.
If you want to profit in time of high volatility, this strategy will be great for you. But it is also very risky. If a scalper find themselves in a position where it is difficult to exit from, they might be hanging onto a position that inevitably leads to losses.
Swing Traders
Swing Traders rely on fundamental analysis to better make a wise decision to their trades and unlike scalpers, tend to hold onto their trades longer ranging from a night to several weeks. They also make use of price trends, pattern, and value of security to find the right financial instrument with short-term price momentum. Basically, their goal is to trade during large price movement daily through longer period monitoring the security.
Swing trading might be the right way of trading if you’re making your living out of your trades, it has lots of advantages such as higher return than investors who buy and hold constantly. Their procedure revolves around buying their security when the market swings upwards and sell when it pauses, stops, or topped out.
Position Traders
Position Traders tend to hold their trades longer than swing Traders, ranging from weeks to months and even years. Their investment goal is more focused on long-term rather than short-term. They would not concern themselves with short-term fluctuations and all the daily bits of economic gist. They would only execute few trade positions in a year. What they are playing with here is the bigger picture while making use of both fundamental and technical analysis. The chart they’re seeing has weekly to monthly scale as to match their goal that is to profit from the primary trends of price movement.
The most important thing to know before you decide which trading strategy that truly match with you is to first know your own investment strategy. Do you want profit that is more short-term than long-term? How diversified is your portfolio? How passionate you are about the trade you’re trading? Know what you want and your general capabilities so then you can better know how you trade regularly. Remember that switching from one strategy to another might not be the best idea and may result to more losses than gain — so, stick to one!
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See also: Why You Shouldn’t Worry About America’s Trade War with China
